A.

Corporation An artificial being, created by operation of law, having the capacity of succession and the powers, attributes and properties expressly authorized by law or incident to its existence (Sec. 2, CC). B. Attributes of Corporation 1. Artificial being It has a juridical personality exists independently from stockholders, members or its officers a. Doctrine of Corporate Entity A corporation comes into existence upon the issuance of the certificate of incorporation (Sec 19, CC). Then and only then will it acquire a juridical personality to sue and be sued, enter into contracts, hold or convey property or perform any legal act, in its own name. i) Residence and nationality the Code does not provide for any citizenship requirement but only residency requirement for the qualification of incorporators ii) Constitutional rights (a) Due process (Albert v. University Publishing, Inc. (13 SCRA 84 [1965]); (b) Equal protection of law (Smith Bell and Co. v. Natividad, 40 Phil. 136 [1919]); (c) Protection against unreasonable search and seizure (Stonehill v. Diokno, 20 SCRA 383 [1967]. iii) Criminal liability Since a corporation is a mere legal fiction, it cannot be held liable for a crime committed by its officers. It does not have the essential element of malice. iv) Right to recover moral damages. A corporation is not entitled to moral damages because it has no feeling, no emotions, no senses (ABS CBN v. CA,

GR No. 128690, Jan 21, 1999). However a corporation is entitled for moral damages in cases of libel, slander, or any form of defamation. Art. 2219(7) of the Civil Code does qualify whether the plaintiff is a natural or juridical person (Filipinas Broadcasting Network. v. Ago Medical and Educational Center-Bicol, et. al, GR No. 141954, Jan. 17, 2005) b. Doctrine of piercing the veil of corporate entity the doctrine that a corporation is distinct from the person composing it is a theory introduced for purposes of convenience and to serve the ends of justice. But when the veil of corporate fiction is used as a shield to defeat public convenience, justify wrong, protect fraud or defend a crime, this fictin shall be disregarded and the individuals composing it will be treated identically (Cruz v. Dalisay, 152 SCRA 487 [1987]). It means that while the corporation cannot be generally held liable for act or liabilities of its stockholders or members, and vice versa because a corporation has a personality separate and distinct from its members or stockholders, however the corporate existence is disregarded under this doctrine when the corporation is formed or used for illegitimate purposes, particularly, as a shield to perpetuate fraud, defeat public convenience, justify wrong, evade a just and valid obligation or defend a crime. The doctrine requires the court to see through the protective shroud which exempts its stockholders from liabilities that they are ordinarily would be subject to, or distinguishes a corporation from a seemingly separate one, were it not for the

existing corporate fiction (Lim v. CA 323 SCRA 102). The doctrine aims to protect the interest of innocent third person dealing with the corporation. i) Alter ego principle or instrumentality rule When one corporation is so organized and controlled and its affairs are conducted so that it is in fact a mere instrumentality or adjunct of the other, the fiction of the corporate entity to the instrumentality may be disregarded (Concept Builders, Inc. v. NLRC, 257 SCRA 149 [1996]. TEST: (1) Control, not mere majority or complete stock control, but complete dominion, not only of finances but of policy and business in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own; (2) Such concept must have been used by the defendant to commit fraud or wrong in contravention of plaintiffs legal right; and (3) the aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of (Concept Builders, Inc. v. NLRC, 257 SCRA 149 [1996]. ii) Probative factors of identity: (1) Stock ownership by one or common ownership of both corporations; (2) Identity of directors and officers; (3) The manner of keeping corporate books and records; and (4) Methods of conducting the business (Concept Builders, Inc. v. NLRC, 257 SCRA 149 [1996].

2. Creature of law Corporation cannot come into existence by mere agreement of the parties as in the case of business partnership. It requires special grant from State exercised by the legislature either through special incorporation law or charter or general corporation law. i) Constitutional limitations. Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations. Governmentowned or controlled corporation may be created or established by special charters in the interest of the common good and subject to the test of economic viability (Art. 12, Sec. 16, 1987 Constitution) 3. Right of succession It is the capacity to have continuity of existence despite the changes of the persons who compose it. Thus, the personality continues despite the changes of stockholders, members, board members or officers. Unlike in partnership, the death, incapacity or civil interdiction of one or more of its stockholders does not result in its dissolution. It persists to exist independently of the individuals or persons composing it. Continuity of existence: The rights and obligations of the a corporation are not affected by the death, incapacity or replacement of the individual members, but the corporate business continues uninterrupted and unaffected as long as the corporate entity continues. 4. Creature of enumerated powers, attributes and properties As it is a mere creature of the law, it can exercise only such powers as the law may choose to grant it, either expressly or impliedly

a.

Doctrine of limited capacities as compared to the doctrine of general capacities Doctrine of limited capacity no corporation under the Code shall posses or exercise any corporate power, except those contracted by law, its Articles of Incorporation, those implied from express powers and those as are necessary or incidental to the exercise of the powers so conferred (Sec. 45, CC). The corporation capacity is limited to such express, implied or incidental powers. b. Ultra vires doctrine if the act of the corporation is not one of those express, implied or incidental powers, the act is ultra vires. Classification of Corporations